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National City, El Cajon battle with uncertainty of redevelopment

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California cities have learned over the last three decades to combat blight and spur economic growth with the use of redevelopment agencies, the state-created bodies that fund new projects with tax revenue from previously completed developments.

But when Gov. Jerry Brown — with the support of the state Legislature and eventually the state Supreme Court — moved to end redevelopment as a means of balancing California’s budget, cities were left not only with no clear path for urban renewal, but also an uncertain future for already-approved redevelopment projects.

Under state guidance, most cities declared themselves the successors to their redevelopment arms. Those successor agencies then had to craft a list of outstanding obligations and hope the state agreed with it.

The approved lists — recognized obligation payment schedules — are the redevelopment projects that cities are continuing to pursue, although the state has made clear that there’s no such thing as a final recognized obligation payment schedule beyond each six-month period. Previously approved projects can fall off the payment schedule if the state deems necessary.

Successor agencies answer to oversight boards, and the oversight boards answer to the state Department of Finance.

Further complicating things, in early July the Legislature passed another bill, AB 1484, that not only authorizes the state or county auditor to recover improperly spent funds, but also takes back money from local Low and Moderate Housing Funds.

In short, cities are now left hoping they can complete a series of development projects before the state ensures redevelopment agencies are left a relic in textbooks on California policy.

Housing project on the line

National City presents an illuminating example. Its recognized obligation payment schedule currently stands at $256.4 million in total outstanding obligations.

Included in that is an award-winning, $80 million affordable housing project that was scheduled to break ground in January, but is now caught in redevelopment purgatory.

The project would build more than 200 affordable units adjacent to the 24th street trolley stop while creating new park space.

The state declared it an approved project, even while informing the city that the bond proceeds used to fund the $25 million redevelopment portion of it are potentially going to be brought back to Sacramento.

With no viable replacement for that $25 million — except to manipulate the financing structure in such a way that the units would no longer qualify as affordable — the project can’t break ground until the state delivers a definitive answer on the future of the bond proceeds the city issued last March.

“The core issue everyone shares is, we were reliant on redevelopment because we get so little of property tax revenue without it, and property taxes are meant to deal with parks and roads, and without those funds, everyone is going to get into deferred maintenance or neglect situations. If you don’t have funding you can’t make improvements,” said Brad Raulston, planning and community development director of National City.

That’s not the only piece of the $256 million list of obligations that Raulston doesn’t expect to come National City’s way. There’s another $62 million for all of the city’s required housing mandates if carried through the entirety of the project area’s housing program.

“We were encouraged to put everything on the [recognized obligation payment schedule],” he said. “Obviously I don’t expect to receive that.”

In early July, National City was forced to make a $4.3 million payment relating to AB 1484.

“It’s changing every day,” Raulston said.

'Everything's on hold'

Meanwhile, in East County, El Cajon’s list of ongoing projects totals $192.8 million, according to its recognized obligation payment schedule filed for the period from July 1, 2012, through the end of the year.

“It has not been easy,” said Jenny Ficacci, housing manager for the city of El Cajon, on the process of establishing what project money the city has to spend.

In addition to state-permitted funding for bond payments and staffing costs, El Cajon’s payment schedule also allows for nearly a half million dollars for revitalization of the city’s Civic Center, several hazmat projects, more than $400,000 for disposition of the functionally obsolete former police station and more than $30,000 for the disposition of two parcels on Johnson Avenue.

Ficacci said the city had to walk away from prospective buyers for other functionally obsolete properties, which were worth more if their standing structures were demolished, when the state rejected payments for the required demolitions.

Nonetheless, she said the city, acting as the successor agency, was proceeding productively until the passage of AB 1484.

“We had a good handle of where we needed to go, but now everything’s on hold, with new deadlines, reports and audits,” she said.

El Cajon’s successor agency was forced to make a $3.8 million payment in early July, after the state’s passage of AB 1484.

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